In a stunning reversal, a federal district court overseeing the AseraCare trial has not only vacated a verdict in favor of DOJ on the issue of whether claims submitted by the defendant were false, but has strongly indicated that the court is likely to grant summary judgment for the defendants. As we have previously reported here and here, in May 2015, the district court elected to bifurcate the trial into two phases, one focused on the falsity of a sample of claims and the second phase focused on the remaining elements of FCA liability. If the government could establish FCA liability through the two phases of the trial as to at least a fraction of the sample, the court planned to permit extrapolation of this liability to the broader universe of claims submitted by AseraCare. A critical issue in the falsity phase has been whether patients met CMS’ medical criteria for hospice eligibility, i.e., they have “a life expectancy of 6 months or less if the terminal illness runs its normal course.” Prior to the court’s decision to bifurcate, the government represented in interrogatories that it would only use the testimony of its expert witness and the sampled medical records to demonstrate that patients did not meet CMS’ criteria, and therefore AseraCare falsely certified to their eligibility for hospice care.
During conferences in July, the government still maintained that the only evidence it would use to prove the falsity of the sample of patients was their medical records and expert testimony from a physician reviewing those records. Subsequently, the government sought to provide the relator and testifying AseraCare employees with the medical records of the sample patients to see if they could provide direct evidence of objective falsity as to any patient eligibility. The court denied the request, refusing “to allow the Government to now change course” and “present evidence to prove falsity that went beyond what it had represented to AseraCare during discovery and on the eve of trial.” As a result, the government was constrained to proving falsity through its expert and the medical records.
Trial began on August 10, and on October 15, the jury concluded that the majority of the claims in the sample were false. After the close of the government’s case-in-chief and again at the close of all of the evidence, AseraCare moved for judgment as a matter of law, arguing that the jury did not have a legally sufficient evidentiary basis to find for the government on the issue of falsity, and further, that the jury had been incorrectly instructed as to the standard of falsity. AseraCare renewed its motion after the jury announced its decision.
At a hearing on October 23, the court acknowledged that it erred in instructing the jury. AseraCare orally moved for a new trial, which the court granted. As the court explained further in its memo, it “should have advised the jury that (1) ‘the FCA requires proof of an objective falsehood’ . . . and (2) a mere difference of opinion, without more, is not enough to show falsity.” Although the government asked the district court to simply recharge the jury and allow it to re-deliberate, the court decided that this course of action would not erase the prejudice to AseraCare (from the incorrect initial jury instructions) or the government (from not trying its case consistent with the correct legal standard).
The court then proceeded to question whether the government, under this correct legal standard, had sufficient admissible evidence “of more than just a difference of opinion to show that the claims at issue are objectively false as a matter of law.” “The sine qua non of a FCA case is not the defendant’s bad conduct, procedures, or policies, but the actual false claim,” and in reviewing the trial record, the court harbored deep reservations about whether the government could establish actual false claims. The government, while initially representing that it would use “pattern and practice” evidence under Federal Rule of Civil Procedure 406 to show that the sampled patients conformed to certain corporate practices, subsequently abandoned this approach before trial. The government then “painted itself into a corner” by resting its case solely on the testimony of its expert, who had changed his own opinion as to hospice eligibility for a handful of patients between an initial review in 2010 and a second review in 2013. AseraCare brought forward testimony from its own experts to support patient hospice eligibility, and as the court explained, “[a]n expert’s opinion disagreeing with the clinical judgments of the certifying physicians, without more, is not enough to prove falsity under the FCA.” As a result, the court sua sponte considered summary judgment under Rule 56(f)(3). The government has until December 4, 2015 to “direct the court to admissible, objective evidence in the Phase One [falsity trial] record, other than [the expert’s] testimony, that would prove falsity and show that the Government presented more admissible evidence than merely a difference of opinion to which reasonable minds could differ.”
We will continue to monitor developments in this case. A copy of the court’s opinion can be found here.